little boxes made of ticky tacky

From Yahoo! Finance:

The downturn has accomplished what a generation of designers and planners could not: it has turned back the tide of suburban sprawl. In the wake of the foreclosure crisis many new subdivisions are left half built and more established suburbs face abandonment. Cul-de-sac neighborhoods once filled with the sound of backyard barbecues and playing children are falling silent. Communities like Elk Grove, Calif., and Windy Ridge, N.C., are slowly turning into ghost towns with overgrown lawns, vacant strip malls and squatters camping in empty homes. In Cleveland alone, one of every 13 houses is now vacant, according to an article published Sunday in The New York Times magazine.

The demand for suburban homes may never recover, given the long-term prospects of energy costs for commuting and heating, and the prohibitive inefficiencies of low-density construction. The whole suburban idea was founded on disposable spending and the promise of cheap gas. Without them, it may wither. A study by the Metropolitan Institute at Virginia Tech predicts that by 2025 there will be as many as 22 million unwanted large-lot homes in suburban areas.

I can't find a post now, but I know I've talked about this possible effect of the housing crisis. Essentially, as property values plummet in the suburbs and rise in the cities, we may see a reversal in our population as the working poor are displaced from the cities and move out into McMansions divided into apartments, while the wealthy and middle class relocate to the cities. The process has a feedback loop built into it, as the presence of brown people scares more whites out of the suburbs and the higher property values in the cities continue to climb as the wealthy move in and their tax dollars contribute to better school systems, more attention from the city council's road repairing committee, etc., thus making them even less affordable for the poor.

I hate the suburbs. I hate everything about the suburbs. They're wasteful. Their relationship to the cities they rely on is parasitic. They're the products of residual, unconscious racism/classism. They're conformist, insular, and nostalgic for a bubble gum Eden that never existed. They're plastic in both the literal and figurative senses, all packaging and presentation, and made primarily of petroleum. As much as I hate the suburbs and wish people would wake up and move the hell out of them, perhaps the only situation worse than all the rich people living out in the 'burbs is all the working poor living out there, miles and miles from their jobs, from everything, with little or no public transportation, trying to divide those flimsy, plastic castles into apartments. If it becomes clear that this is going to happen, cities and states need to be scrupulous about preparing the suburbs for the change by improving their transportation infrastructure and getting serious about home inspection, or this is not going to go well.

a major booboo from ABC News

Ok, I'm really surprised by this one. Those of you who know a little bit about taxes are going to get a laugh out of this one. From ABC News' Emily Friedman:

President Barack Obama's tax proposal – which promises to increase taxes for those families with incomes of $250,000 or more -- has some Americans brainstorming ways to decrease their pay, even if it's just by a dollar.

A 63-year-old attorney based in Lafayette, La., who asked not to be named, told ABCNews.com that she plans to cut back on her business to get her annual income under the quarter million mark should the Obama tax plan be passed by Congress and become law.

So far, Obama's tax plan is being looked at skeptically by both Democrats and Republicans and therefore may not pass at all.

"We are going to try to figure out how to make our income $249,999.00," she said.

"We have to find a way out where we can make just what we need to just under the line so we can benefit from Obama's tax plan," she added. "Why kill yourself working if you're going to give it all away to people who aren't working as hard?"

Ok, there's a fundamental misunderstanding of the way income taxes work in this article that completely undermines its entire thesis. Can you see it? Admittedly, I did not know this (yay Turbotax!), but I'm not a journalist writing about tax brackets without understanding how tax brackets work.

Here's the thing: The federal income tax is progressive. That means that when you move up to a new tax bracket, it's only the extra income that is subjected to the new tax rate. That is, if Barack Obama says incomes of $250k/year and over will be taxed 39%, and you make $260k/year, you only pay 39% on the $10,001 that put you into that tax bracket. As Wikipedia puts it:

A progressive tax taxes differentially based on how much has been earned. For example, the first $10,000 in earnings may be taxed at 5%, the next $10,000 at 10%, and any more income at 20%.

Thus, it makes no sense to lower your pay under $250k because the person who brings in $251k will always make more than the one making $249k.

Says Jonathan Chait at TNR:

This article is obviously an outlier, but it is an extreme manifestation of a broader phenomenon. Clay had a good post about how Politico's Jeanne Cummings has turned into a sounding board for right-wing economic notions. And Matthew Yglesias had a good point about how the media massively overrepresents the perspective of the rich in reporting and commentating on the tax debate. (It has framed Obama's plans as a tax hike when the vast majority of Americans will experience it as a tax cut.) Sadly, I think the next few months are going to bring us a massive surge of sympathetic and/or uninformed coverage of the tax debate from the perspective of the wealthiest segment of America.

Then again, it can be hard to consider ABC News a "serious" news organization sometimes.

crying themselves to sleep in their million dollar homes

It's hard knock life being rich and incompetent. Seriously though, this media swill about how it's hard to live in NYC on a half million dollar/year pittance is just silly. Who do they think they're going to convince?

The argument is that $500k/year is overly punitive because that means these execs will have to cut their standard of living. Notice from the article:

“As hard as it is to believe, bankers who are living on the Upper East Side making $2 or $3 million a year have set up a life for themselves in which they are also at zero at the end of the year with credit cards and mortgage bills that are inescapable,” said Holly Peterson, the author of an Upper East Side novel of manners, “The Manny,” and the daughter of Peter G. Peterson, a founder of the equity firm the Blackstone Group. “Five hundred thousand dollars means taking their kids out of private school and selling their home in a fire sale.”
...
Few are playing sad cellos over the fate of such folk, especially since the collapse of the institutions they run has yielded untold financial pain. But in New York, where a new study from the Center for an Urban Future, a nonprofit research group in Manhattan, estimates it takes $123,322 to enjoy the same middle-class life as someone earning $50,000 in Houston, extricating oneself from steep bills can be difficult.

What? You mean people who get paid millions of dollars a year yet squander it all on an absurd lifestyle, run their businesses into the ground, eat up hundreds of billions of dollars in taxpayer money, and send the economy into a tailspin costing millions of poor and middle class people their jobs, might have to lower their standard of living, perhaps even living with the same lifestyle as the hoi polloi in Houston who make (gasp!) a mere $200,000/year? How will they eat?

The article then ascends to a sort of nirvana of unintentional comedy, listing all of the highlights of these people's conspicuously consumptive lifestyle and how much it costs to maintain them, stating with no hint of irony, "The cold hard math can be cruel." The first thing on the list is taxes. Taxes. Do I even need to discuss the audacity of an article defending the lifestyles of people whose businesses accepted government bailout money to complain about their tax burden?

The second thing on the list? Two annual vacations at a minimum of $16,000. It only goes downhill from there.

Let's try to come up with some more revealing facts about these people's new lifestyle. I wonder, just what kind of a house can one of those $500k/year-making practically-Texas-ditch-diggers afford? Assuming a 35% tax burden (most people pay closer to 25%, but I estimated upward to account for high income bracket) and that they're spending a quarter of their income on their mortgage (a conservative estimate for most people), a New Yorker of that income level could afford a monthly PITI (principal, interest, taxes, and insurance) of $6,770. We'll use double the New York property tax rate of 1.2% to account for higher taxes in the city, a 5.1% interest rate, and an insurance rate of 1% (which is high). Using this calculator that comes out to a roughly $1.2 million mortgage. Looking through Google Base, I found a picturesque 4 bedroom house on a 4 acre paradise in New City, this 3,216 ft. monstrosity overlooking the ocean, and a pair of nice condos on the upper east side for that amount.

Poor saps, who could live in those hell-holes?

McCain's houses

Back home we had a pithy saying for situations like this: it's called "having more money than sense."

a glimpse into life on the other side

Many of you are familiar with the fabulous personal finance website Get Rich Slowly, a blog dedicated to saving money, getting out of debt, and improving your quality of life.

Apparently, some people need it more than others.

I found this story at Yahoo!'s finance area listing 12 "necessities" you can live without. Either the rich and wannabe rich classes are much dumber with their cash than I thought (a distinct possibility) or this story was just intended as a sort of Get Rich Slowly For Complete Ruttin' Fools.

I mean c'mon, people, who considers a weekly manicure to be a necessity? Or, for that matter, lawn service? Or hired pet walkers?

but remember, the black guy from Chicago is the elitist

Apparently Clinton felt that the rich don't get enough pandering in this country, so she made her O'Reilly appearance a chance to assure them that she's their candidate.

I am glad she reminded everyone that it's Obama who's for raising the payroll tax cap and not her. Good to know that it's Obama and not Clinton who's for the only permanent solution to Social Security solvency that doesn't include raising the tax itself (which only counts the first $90k of your income, disproportionately affecting the poor and middle class) or cutting the already criminally low benefit checks. I guess that means that, if you're poor/middle class, your income is subject to the payroll tax, and you will be needing Social Security to live on when you retire, Obama's your candidate. If, however, you're rich, your income comes from pay over $90k/year, capital gains and/or an estate, and you won't even notice your Social Security checks 20 years after you retire in your 40's, then Clinton is a perfect fit for you.

Glad she cleared that up.

People are going to jump all over the "rich people-- God bless us" line of hers as it's an easy soundbyte to latch onto and it's a lovely compliment to the $109 million tax form thing, but I wish I knew what she was trying to say with that line. She was in the middle of qualifying it when O'Reilly cut her off (mirabile dictu!), and I just wonder what would have possessed her to say that.

a corollary to the class conversation-- who is not "middle class?"

In a city where everybody makes a lot of money, prices rise so high that the moderately rich live like middle-class people. Just because the United States has a dozen of these communities doesn't mean that $200k is middle class.

Also, if you make enough money that the interest/capital gains on your money is enough for you to live on, you're rich. Never in the history of the world have people made enough money that they could stop working (without government help, anyway) and not been called "rich." Just because you're bad with your money and blow it all trying to have the most expensive stuff doesn't make you middle class.

Put another way, it's stupid to define rich as "having more money than you could possibly spend." As we've seen with powerball winners, people can spend a shitload of cash if they're undisciplined with their finances.

Obviously, it's extremely difficult to develop objective criteria for the boundaries marking off middle class (or, perhaps, the middle classes) from rich and poor. Poor is obvious: if there is a legitimate concern that you may not be able to afford food until the next paycheck, you are poor. Rich is somewhat more difficult, mainly because it's somewhat of a taboo in this country to admit that you're rich, but there's one solid criterion: if work has never been a necessity for you, you're rich.

The problem with our discourse hinges mainly on the fact that there is a group of people who do work or have worked but should by most standards be considered rich. Because of said taboos, however, we allow them to call themselves "upper middle class" (and even "middle class" in some cases) and they skew perceptions of economic class because they don't really belong in the same group with everybody else.

The median household income in this country is $48,201. If your household brings in $60k, you're in the 60th percentile of income earners (as in, 59% of the country makes less than you). If you would consider a 60k/year home to be "poor," you're probably rich. Yes, even if you live in New York, and even if you still have to work, and even if you're living paycheck to paycheck because you're still paying off the million dollar house and the Land Rover and your kid's private school and the credit cards.